Verizon: Collision of past with future

Plus: Selective disclosure, Lilly, Blodget, CA and more

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CBS.MarketWatch.com

WASHINGTON -- Verizon and its main union have kept up talks to end a strike by the company’s 87,000 workers in a dispute that highlights the struggles besetting an old-line telecommunications giant makes the transition into the industry’s new era. It’s not just about pay issues. Instead, the union is worried about the increasingly fast pace of work and about the possibility Verizon (VZ) might try to shift jobs to lower-paying parts of the U.S or to other countries. At the same time, the workers want to share in the fast growth being experienced by Verizon’s data and wireless businesses. The dilemma facing Verizon is that many of its competitors are non-unionized and have lower costs. Those very same rivals also tend to be younger, leaner and better geared to meet the demands of their customers swiftly.

SEC bans selective disclosure

WASHINGTON -- The U.S. Securities and Exchange Commission voted 3-1 to approve a controversial rule that forbids company officers from sharing market-sensitive information with analysts and big investors while excluding the public. Investor advocates have applauded the rule, arguing it will cut down on incidents in which a company’s stock rises or falls dramatically as institutional investors move in or out of a stock based on talks between company officials and hand-picked analysts.

Japan ends ‘zero-rate’ monetary policy

TOKYO -- Japan’s central bank, displaying its independence in the face of intense political pressure to avoid applying even the slightest brake on the country’s fragile economic recovery, decided Friday it’s safe to nudge interest rates higher for the first time in 10 years. The Bank of Japan’s policy board voted to raise the target for short-term interest rates to 0.25 percent from practically zero, where it has been for 18 months. Bank governor Masaru Hayami has been insisting for weeks that ending the “zero-rate” policy -- designed to stave off a banking crisis and recession -- would be justified if deflationary pressures in Japan disappeared and the economy steadily improved.

Blow to Lilly’s Prozac patent chops value

INDIANAPOLIS -- Wall Street has been forced to reassess shares of Prozac-maker Eli Lilly & Co. and other pharmaceuticals firms that are in the antidepressants business in the wake of a court decision invalidating one of Lilly’s Prozac patents. On Wednesday, Lilly (LLY) lost about a third of its market value after a U.S. appeals court upheld a lower court’s decision enabling competitors to sell generic forms of its wildly popular antidepressant. Generic drug maker Barr Laboratories (BRL) is challenging two Lilly patents that protect it from generic competition.

The lot of laid-off workers

WASHINGTON -- About a quarter of U.S. workers whose jobs were eliminated from 1997 to 1999 haven't been reemployed, and almost half of those age 55 to 64 weren't reabsorbed into the workforce, according to a new Labor Department report on the state of displaced workers in the U.S. Despite low unemployment and strong job growth, 3.3 million Americans who held their jobs for at least three years lost them from 1997 to 1999, on par with the previous three-year period. Another 4.3 million people were displaced from jobs they'd held for less than three years. Of the total number of dislocated workers who found new jobs, 58 percent were earning as much or more in their new positions, while 42 percent or 680,000 people were earning less. Of those making less, three out of five had their wages reduced by 20 percent or more.

Productivity soars, and prices remain in check

WASHINGTON – U.S. economic news brightened again, easing concerns that the Fed would resume its monetary-policy tightening later this month. American companies increased their productivity at a 5.3 percent annual rate in the second quarter even as unit labor costs fell 0.1 percent. That report was astonishing in itself. But the picture was even more stirring when investors learned Friday that producer prices in July were flat. The tame inflation news bodes well for those investors who are wondering whether the economy has cooled off enough to appease the inflation fighters at the central bank.

Rollback: Bridgestone’s massive tire recall

TOKYO -- Bridgestone moved to recall 6.5 million tires sold in the United States due to safety concerns. The Japanese-based company’s shares (BRDCY) had been under heavy selling pressure since earlier this week, when U.S. retailers Sears Roebuck, Discount Tires and Montgomery Ward announced they would halt sales of certain Firestone tires. U.S. traffic-safety regulators are investigating whether the tires contributed to hundreds of accidents and nearly 50 deaths.

Wang moves aside at Computer Associates

ISLANDIA, N.Y. -- Computer Associates said founder Charles Wang will step down as chief executive, handing the reins to his No. 2 executive, Sanjay Kumar. The struggling business-software company also said it will spin off some of its technology, starting with formation of Ican-ASP Inc. to service the application service provider infrastructure marketplace. And CA (CA), which saw its stock decimated this summer by an earnings warning, also said it has hired investment banks Credit Suisse First Boston and Morgan Stanley Dean Witter to advise it on the spin offs.

Blodget gets picky, and saves face

SAN FRANCISCO -- Merrill Lynch’s Henry Blodget provides the latest reason investors might want to temper the trust they put in technology-stock analysts. On Monday, the Internet guru cut his ratings on 11 of the 29 companies that he covers – resulting in slashed market values for such issues as Barnesandnoble.com (BNBN), Buy.com (BUYX), EToys (ETYS), Pets.com (IPET), Webvan (WBVN) and IVillage.com (IVIL). Now, his rating cuts are way too little, way too late to stem most investors’ losses. In downgrading his ratings this week, Blodget did little, if anything, for investors. The ratings cuts seem to be a face-saving exercise.

The pitfalls of tech funds and youth

SAN FRANCISCO -- Wondering whether to dump those technology funds that did so well for you last year? Well, guess what? Most of last year's star performers are this year's dogs. The top eight tech funds of 1999, which last year averaged a whopping 265 percent, are down an average of 3.4 percent this year, through Aug. 8. For those of you who thought that tech funds were that one exception in the mutual fund industry where youth is more important than experience, think again! None of those funds were around five years ago, and only three of the eight are more than three years old.

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